current
Climate Change Risks and Opportunities
Climate change is creating both risks and opportunities for investors, with varying impacts across different asset classes and sectors.
Timeframe
long-term
Categories
Impact areas
Detailed Analysis
The report acknowledges the complex and multifaceted nature of climate change risk, encompassing both physical risks (e.g., extreme weather events) and transition risks (e.g., policy changes, technological shifts). It emphasizes the importance of assessing companies' transition plans and their credibility in mitigating climate-related risks. The report also highlights the potential for climate change to create investment opportunities in sectors such as renewable energy and green technologies. It notes that while some asset classes, like commodities, may benefit from the green transition, others, like real estate, face significant physical risks.
Context Signals
Around 22.5% of global emissions are currently priced through carbon taxes or emissions trading schemes.
The global average price of carbon is below USD 6 per tonne, while estimates suggest it needs to reach USD 100 to adequately internalize externalities.
The EU's Carbon Border Adjustment Mechanism (CBAM) could incentivize other countries to implement carbon pricing.
Edge
Transition finance, focused on supporting high-emitting companies with credible decarbonization plans, is emerging as a key area for climate-conscious investors.
The development of robust metrics for measuring climate risk and transition progress will be crucial for effective portfolio management and alpha generation.
Investors should consider the potential for both positive and negative impacts of climate change on different asset classes and sectors, and integrate climate scenarios into their investment strategies.
